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British stocks extended their gains on Thursday, with the FTSE 100 rising 0.9% to reach its highest level in over a month, as investors looked toward potential Federal Reserve rate cuts following a decline in US core inflation. Precious metal miners advanced 3.2%, with gold prices near one-month highs, while aerospace and defence stocks climbed 2.1%, including a 2.5% rise in Rolls-Royce after Morgan Stanley raised its price target. The Thursday rally followed a more than 1% increase in the previous session, driven by an unexpected slowdown in UK inflation and a sharper decline in core price growth measures closely tracked by the Bank of England. This development is likely welcomed by Finance Minister Rachel Reeves, who faced market turbulence earlier in the month due to significant business tax hikes. Additionally, UK economic output showed modest growth in November, the first month after the tax adjustments, though the increase was below expectations. Global markets also found support on Wednesday, as softer US core inflation reinforced hopes for future Federal Reserve rate cuts.

Single Stock Stories:

• Shares of Taylor Wimpey dropped by as much as 3%, making it one of the largest percentage losers on the FTSE 100 index. The UK homebuilder has indicated rising construction costs and uncertain market conditions as the British housing market faces challenges related to affordability and broader economic issues. Excluding joint ventures, the number of homes built by Taylor Wimpey in Britain decreased by approximately 4%, totalling 9,972 homes. The company has reaffirmed its forecast for FY24 operating profit to align with market expectations and stated that it is positioned to construct more homes in 2025 compared to the previous year. The stock has declined by 17% in 2024.

• Global review platform Trustpilot surged 11%, making it the top gainer across London's main market indexes. The company expects full-year adjusted core profit to exceed analyst consensus of $22.2 million and forecasts 18% annual revenue growth on a constant currency basis, outperforming the consensus estimate of 16%. Trustpilot also reported a 23% increase in bookings, driven by strong performance in its focus markets, particularly North America. In 2024, the stock has soared approximately 120%.

• Shares of British meal delivery company Deliveroo rose 4.6% to 135.3p after reporting a 7% increase in Q4 gross transaction value (GTV) on a constant currency basis. The company highlighted a 9% rise in Q4 GTV for its UKI division, supported by strategic initiatives. Analysts at Panmure Liberum noted that the UKI division performed strongly in Q4, driven by the grocery sub-sector, which they estimate accounted for 15% of the group’s GTV in the second half, with a likely higher share in the UK. Deliveroo stated that its FY 2024 GTV is in line with expectations and adjusted EBITDA is anticipated to reach the upper end of its guidance range. The stock has gained around 11% in 2024.

Broker Updates:

• Barclays has a positive outlook on UK banks, anticipating robust earnings growth over the next three years, despite lacklustre growth prospects in Britain. Recent data revealed that the UK's economic output rebounded in November, but the future appears bleak due to tax increases in the budget and uncertainties surrounding Trump's foreign policy. Nevertheless, Barclays is confident that UK banks are set to achieve some of the highest earnings growth and capital returns among European banks, all while trading at a continued discount. "Even with the UK's economic challenges, the operating environment remains very favourable," Barclays states. "With rising interest rates, deposits are increasing, competition has diminished, savings rates are being reduced (betas 40-100%), and the mix is improving." The recent decline in gilt prices also presents a chance for British banks, according to Barclays. "Gilts are an appealing asset class for banks with available capital, which may prompt Treasurers to expedite their transition from politically sensitive reserves and enhance their net interest income (NII)," Barclays adds. Barclays has assigned overweight ratings to both Lloyds and NatWest, projecting that the two will increase their earnings per share (EPS) by 40-50% over the next three years, returning 35-50% of their market capitalisation.

Technical & Trade View

FTSE Bias: Bullish Above Bearish below 8225

• Primary support 8000

• Below 8000 opens 7855

• Primary objective 8600

• Daily VWAP Bullish

• Weekly VWAP Bullish

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